TOWN OF WINDSOR TOWN COUNCIL

ITEM NO. : 11.2 Town Council Meeting Date: June 15, 2016 TOWN OF WINDSOR TOWN COUNCIL To: From: Subject: Mayor and Town Council Toni Bertolero, Interim Community Development Director Inclusionary Zoning Policies and Guidelines for Inclusionary Housing Fund Recommendation to Council: 1. Provide direction on impact fees for secondary units (i.e. granny units); and 2. Provide direction on inclusionary housing policies; and 3. Adopt a resolution approving the Guidelines for Inclusionary Housing Fund. Background: On March 2, 2016, staff presented an update to Council regarding the Town s inclusionary housing policies and also presented draft Guidelines for the use of in-lieu fees in the Town s Inclusionary Housing Fund (IHF). At the meeting, the following key direction was provided to staff: Reduce impact fees for secondary units (i.e. granny units ). Develop an inclusionary housing policy to effectively increase affordable housing stock. Revise the Guidelines for the Inclusionary Housing Fund based on comments and input from Council. The comments received at the March 2 meeting are listed on the table shown in Attachment 1 and includes a brief summary of how the comments are addressed. Discussion: The three key directions as described in the previous section are discussed separately in the paragraphs that follow. 1. Reduce Impact Fees for Secondary Units At the March 2 meeting, Council directed staff to investigate reducing impact fees for secondary units in order to encourage building granny units to help increase Windsor s affordable housing stock. The current impact fees for granny units are provided in Table 1 on Attachment 1. The fees are based on a granny unit of a maximum size of 840 square feet (the maximum size consistent with the State s regulations for granny units). See Attachment 2 for an analysis of the granny unit impact fees and options for consideration. Table 2 on Attachment 1 lists three options for ways to reduce each of the impact fees for granny units. Because there must be a nexus between the fee amount and the impact of the new granny unit, if Council chooses an option where the fee would be less than the impact of the granny unit, the fee shortage should be covered by another source, namely the General Fund. Based on the comments received from Council, the reduced impact fees could be based on a small size unit (up to 500 square feet) and a large size unit (501 to 840 square feet). Should tiny houses become more common, Council could add another fee for tiny size granny units in the future. 1 of 3

For purposes of this analysis, staff used a median size of single family home of 2,200 square feet. This figure was obtained from the U.S. Census for the western region for median sizes of homes in the last 10 years. The Town does not have a formal tracking method to determine the average for Windsor, hence the U.S. Census data was used. Staff will provide a comparison of the Town s impact fees for granny units in comparison to other agencies at the Council meeting. Recommendation: Staff requests direction on which option Council chooses for each granny unit impact fee. Next steps: After Council chooses an option or modified option for each fee, staff will work with a financial consultant to develop the fee, perform the required nexus review (in accordance with State AB 1600 reviews for development impact fees), and present a resolution adopting the new fees at a future Council meeting. 2. Develop an inclusionary housing policy to effectively increase affordable housing stock Council provided input and comments at the March 2 meeting and the comments and responses are summarized in Attachment 2. Recommendation: Staff requests further input and comment as staff develops the draft Inclusionary Zoning Ordinance amendments. Next steps: Staff will be working with a Housing Consultant to develop the Inclusionary Zoning Ordinance amendment. Staff will bring the draft to Council in fall 2016 and staff will have a better idea at that time whether it would make sense to consider implementing the ordinance amendments at that time, or wait until after the General Plan is adopted and consider the inclusionary zoning changes with the full Zoning Ordinance changes. 3. Revise the draft Guidelines for the IHF based on comments and input from Council The revised draft Guidelines are included in the draft Resolution (see Attachment 3). The draft Guidelines were modified to address the comments from Council received at the March 2 meeting as listed on Attachment 1. Furthermore, staff conducted outreach to affordable housing agencies and advocates and incorporated their input into the draft Guidelines. Recommendation: Staff requests Council adopt a resolution approving the draft Guidelines, with changes, as may be directed during the meeting (see Attachment 3). Environmental Review: This is an administrative action which does not require environmental review. Fiscal Impact: The proposed action will have no fiscal impacts at this time. The current balance of the Inclusionary Housing Fund is $1,246,430. 2 of 3

Attachments: 1. Analysis and Options for Granny Unit Impact Fees 2. Council Comments from March 2, 2016 Meeting and Response to Comments 3. Resolution adopting Guidelines for Inclusionary Housing Fund Prepared by: Toni Bertolero Interim Community Development Director Reviewed by: Camille Kazarian Assistant Town Manager Recommended by: Linda Kelly Town Manager 3 of 3

ATTACHMENT 1 ANALYSIS AND OPTIONS FOR GRANNY UNIT IMPACT FEES Table 1 Current Granny Unit Impact Fees Impact Fee Purpose of Fee Fee for Single Family Drainage Traffic Parks & Recreation Public Facilities Recycled Water Water Wastewater Fee for Granny Unit Home Provide funds to pay for flood control mitigations for impacts due to development and loss of pervious surface areas. $3,433. $3,433. Provide funds to pay for traffic mitigation projects for increased traffic (trip generation). $11,713. $3,015. Provide funds to pay for new parks and park amenities due to new residential development. $9,868. $9,868. Provide funds to pay for new public facilities attributed to new development. $5,079. $5,079. Provide funds to pay for an expansion of recycled water system and facilities for new development in an area with available recycled water system. $512. $0. Provide funds to pay for water capacity projects for water supply, storage tanks and other water distribution systems due to new $8,415. $0. development. Provide funds to pay for capacity enhancement projects for wastewater treatment and collection system expansion due to new $11,052. $5,527. development. Total $50,072. $26,922. Table 2 Options for Reducing Granny Unit Impact Fees Impact Fee Current Fee Basis: per structure or per impact Option 1 Basis: No change Option 2 Basis: 40% pro rata share Option 3 Basis: direct nexus Drainage $3,433 $3,433. $1,373 $1,373. Traffic $3,015. $3,015. $4,685 $3,015. Parks & Rec. $9,868. $9,868. $3,947. $0. Public Facilities $5,079. $5,079. $2,032 $0. Recycled Water $0. $0. $0. $0. Water $0. $0. $0. $0. Wastewater $5,527 $5,527. $4,434. $4,434. $26,922. $26,922. $16,471. $8,822. Notes: 1. Options based on large granny unit (840 sq. ft.) in comparison to single family home (2,100 sq. ft.), equivalency is granny unit is 40% of single family home size. Small granny unit fees would be 40% less than large granny units. 2. Formal nexus study in accordance with AB 1600 would need to be conducted prior to finalizing fee amounts and resolution adopting new fees. I:\60 - Community Development Dept\Housing Division\Housing Guidelines\Meetings\2016-06-15 TC\Attach 2 Analysis & Options Fees.docx 1

ATTACHMENT 2 Council Comments from March 2, 2016 Meeting and Response to Comments No. Comment Response 1. Low income people don t typically live in granny units so why should granny units be considered to be affordable housing? The Town will not be able to count granny units in its affordable housing stock unless the owner commits the unit to be affordable rental housing. This can be done through 2. We need to incentivize the building of granny units by reducing impact fees. 3. Incentivize building of granny units by not requiring on-site parking. 4. Look at the threshold when affordable housing is required for residential projects. 5. How should land donation be considered or be credited towards a residential project? 6. Residential mixed-use projects should not be eligible for receiving grant funding through the Town s in-lieu fee fund. 7. Come up with options of when to collect fees versus building affordable housing on site. What is Petaluma doing? 8. Establish priorities for granting funds to Windsor residents, seniors, veterans, and the homeless. 9. Need to have both affordable for-sale and affordable for-rent housing. 10. Make affordability requirement permanent and not a time frame, like 10 years. 11. Not supportive of a 10% set charge for administrative costs or at least minimize the administrative charges, not like how Redevelopment funds charged administration. 12. Not supportive of a Housing subcommittee review the grant applications. 13. Need to be flexible when applications will be reviewed, not like the Merit Process which is only done once a year. zoning requirements and deed restrictions. Impact fees are discussed earlier in this report and will be based on actual impact rather than a standard fee similar to a stand-alone single family home. This, in effect, will reduce the fees, whether the units are deemed affordable housing or not. On-site parking is currently not required for granny units. Affordable housing is required for development projects with 10 dwelling units or more. As the Inclusionary Zoning ordinance amendments and the Inclusionary Housing in-lieu fee updates are being conducted, this threshold will be reviewed to see and whether the Town could consider applying an in-lieu, per dwelling unit fee to all projects no matter the size. As with item #4 above, staff will review how land donation could be considered or be credited towards a residential project when the Inclusionary Zoning ordinance amendments and the in-lieu fee updates are conducted. To clarify, the portion of a mixed-use project eligible for receiving a grant is the residential portion that would be affordable housing. Staff will develop options for the Inclusionary Zoning ordinance amendments to address this question and will review what other local agencies are doing in this area. These categories of applicants are identified for priority in the draft Guidelines for Inclusionary Housing Fund (Guidelines). Both for-sale and rentals are included in the draft Guidelines. Permanent affordable housing is identified in the draft Guidelines. Administrative costs in the Guidelines are reimbursable for direct charges only (cost recovery basis), not for Town staff time, and will be reported to Council on an annual basis for reimbursement approval. Staff will do initial review of the applications and will submit to Council for review at a regularly scheduled Council meeting. In order to provide a balance between flexibility and impacts to staff time, the Guidelines provide for reviewing applications and submitting to Council on a quarterly basis, but also allowing staff to bundle applications to optimize efficiency and help reduce the administrative burden on staff. I:\60 - Community Development Dept\Housing Division\Housing Guidelines\Meetings\2016-06-15 TC\Attach 1 Council input Mar 2 2016.docx

ATTACHMENT 3 RESOLUTION NO. A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF WINDSOR APPROVING GUIDELINES FOR INCLUSIONARY HOUSING FUND WHEREAS, the Town collects housing in-lieu fees from residential development in lieu of constructing affordable housing (herein referred to as inclusionary housing fees ); and WHEREAS, the Town desires the establishment of guiding principles for the use and disbursement of the Town s inclusionary housing fees, said fees collected in the Town s Inclusionary Housing Fund; and WHEREAS, Guidelines for the Town s Inclusionary Housing Fund ( Guidelines ) were presented to Council at its meeting of June 15, 2016 to establish such guiding principles for the use and disbursement of the Town s inclusionary housing fees. NOW, THEREFORE, BE IT RESOLVED that the Town Council hereby approves the Guidelines for the Town of Windsor Inclusionary Housing Fund, included as Attachment A and incorporated herein by reference. PASSED, APPROVED AND ADOPTED this 15th day of June 2016, by the following vote: AYES: NOES: ABSTAIN: ABSENT: ATTEST: MARK MILLAN, MAYOR MARIA DE LA O, TOWN CLERK Attachment: Attachment A Guidelines for Inclusionary Housing Fund dated May 31, 2016 1 of 1

ATTACHMENT A TOWN OF WINDSOR INCLUSIONARY HOUSING FUND DRAFT GUIDELINES May 31, 2016 Purpose The purpose of these Guidelines is to establish guiding principles for the use and disbursement of the Town s inclusionary housing fees (also referred to as housing in-lieu fees). These Guidelines will supplement, but not supersede, the requirements as set forth in the Town s Zoning Ordinance. Review Authority The Community Development Director (Director) is responsible for interpreting these Guidelines and implementing the procedures set forth herein, except as specifically stated as requiring the approval of the Town Manager or Town Council. Definition and Types of Funds The Inclusionary Housing Fund (IHF) contains revenue from housing in-lieu fees paid by new development as required under the Inclusionary Housing provisions in Chapter 27.23 of the Zoning Ordinance and consists of three separate funds as follows: 1. Main Fund (80 percent of funds paid into the IHF). The Main Fund is for development projects listed in the section entitled Eligible Projects and Programs that are proposed within the Town s boundaries. 2. Special Projects Fund (10 percent of paid funds in the IHF). The Special Projects Fund is for projects the Town Council may want to invest in or support that benefit those living in Sonoma County that may be undertaken by another organization such as Sonoma County Community Development Commission for countywide homeless, veterans assistance, etc. 3. Administrative Fund (actual costs of administration up to 10 percent of paid funds into the IHF). The Administrative Fund is defined in the Administration and Administrative Fund section below. Goal of Inclusionary Housing Fund The Town of Windsor will encourage the production of additional affordable housing units through distribution of its Inclusionary Housing Fund. Towards this end, the purposes of the Inclusionary Housing Fund are: 1. To provide direct financing; 2. To leverage other funds; and 3. To reduce the cost of borrowing. Administration and Administrative Fund The Town will administer the funds through the Administrative Services Department (Department). Town costs will be covered by the General Fund for each fiscal year. Within ninety (90) days of the end of the fiscal year, Department staff will present a report to the Council, containing an accounting of direct costs reimbursable to the General fund up to a 1

ATTACHMENT A maximum of 10 percent of inclusionary housing in-lieu fees paid by developers during the fiscal year or 10% of the fiscal year-end fund balance, whichever is greater. For the first year these Guidelines are in effect, the maximum reimbursable costs to the General Fund shall be set at $120,000. Direct costs that are eligible for reimbursement are direct charges and payments for legal services, professional and consultant services, and advertising and marketing services and supplies. Other direct costs and charges not listed herein may be allowed at the discretion of the Town Manager. Town staff time is not eligible for reimbursement. Eligible Projects and Programs In general, projects and programs are eligible for funding from the Town s Inclusionary Housing Fund when the project or program increases affordable housing stock in the town. Eligible projects and programs may include: 1. Construction or acquisition of permanent for-sale affordable housing and affordable rental housing; 2. Construction or acquisition of permanent residential for-sale and rental affordable housing in mixed-use developments; 3. Acquisition of land to provide local sites either by direct purchase of property by the Town or indirect purchase of property by a developer for the purpose of development of affordable housing; 4. Transitional or emergency housing and homeless shelters; 5. Preservation of at-risk assisted housing (such as purchase of apartments when Section 8 contracts or tax credits expire); 6. Homeownership assistance for permanent for-sale affordable housing, including down payments, closing costs, and mortgage assistance; and 7. Other programs and projects meeting the Town s affordable housing goals as considered by Council on a case-by-case basis. Eligible Populations Housing projects serving Extremely Low, Low or Very Low Income households, including the homeless, veterans, seniors and the disabled, are eligible to use this Fund. Populations that are Moderate are ineligible. Eligible Applicants Housing projects serving Extremely Low, Low or Very Low Income households for applicants that are: 1. Town of Windsor residents. A Town of Windsor resident applicant is defined herein as a resident (with or without a partner) residing within the Windsor town limits and has continuously resided in the Windsor town limits prior to and including at the time of the filing of the application for at least five (5) years. This provision is subject to Fair Housing Laws, as may apply. 2. Projects, programs or individual permanent for-sale affordable housing for applicants in the following categories: veterans, seniors, the disabled and the homeless. 3. Private nonprofit organizations. 4. Private for-profit developers partnered with nonprofit developers and/or service providers. 5. Any qualified project or program proponent. 2

ATTACHMENT A Types of Assistance (either predevelopment, direct project/program, or both) 1. Grants (conditioned by formal, recorded agreements) 2. Loans Secured by collateral, typically project property Paid back on short or long term, with interest set at the maximum allowed under the State of California Tax Credit Allocation Committee (CTCAC) MAY be deferred (in whole or partially) for special circumstances Loans MAY be forgivable (convert to grants) under certain circumstances, timeframes Amount of Assistance Assistance provided by the Town of Windsor will vary, at the discretion of the Town Council, based on factors such as the amount of funds available in the account, the project s leveraged funding, the targeting of lower income levels and/or special needs households, the mechanism and duration of affordability restrictions and the legal status of the majority owner/developer (nonprofit vs. for-profit, for example). Council may provide assistance up to the amount that is available in the Fund, but in no event can the fund balance of the Main Fund or the Special Projects Fund be drawn negative. Application and Distribution Process Main Fund 1. A potential applicant shall submit a letter of interest, complete with information requested in the Town s application form, to the Director. 2. The Director or his/her designee(s) will review the application for eligibility and completeness. 3. Following a completeness determination, the Director will issue a Call for Projects for a period of two (2) weeks to disclose the Town s intent to review a project for grant funding and any interested applicants may apply to compete for the available funds. 4. Within thirty (30) days of the public release of the Call for Projects or as practicable to bundle the applications as noted below, the Director will submit a request to Council for review of the application and granting of funds at a future regularly scheduled Town Council meeting. 5. The Town reserves the right to bundle applications for Town Council review at periods of time of no more than one time every four (4) months of determination of a complete application in an effort to lessen the administrative burden and impacts to Town staff. 6. The Town reserves the right to award NO FUNDS or partial funds at the end of the review process. 7. The Town Manager has the authority to revise deadlines associated with the Application and Distribution process to mitigate conflicts with other Town deadlines and to improve process efficiency in any given fiscal year. Special Projects Fund 1. Applications for Special Projects will be reviewed by the Director or his/her designee(s) on a first-come, first-served basis. 2. From time-to-time, the Director may issue Requests for Proposals for a Special Project, as approved by the Town Council. 3

ATTACHMENT A Selection Guidelines 1. Award decisions will be made by the Town Council upon report from the Director at a regularly scheduled meeting of the Town Council. 2. Funding requirements (local objectives, all applicable laws like Article 34, etc.). 3. Competitive Evaluation Criteria (points for each criterion, or ranking by number of criteria met by project. 4. Funding preferences (less restrictive than priorities but Town preference for long-term deed restricted projects). 5. Priorities (like projects that leverage other funding, serve lowest income households, offer longest affordability, etc.). 6. Set-aside funds available (for Special Projects). 7. Capacity of developer or service provider to complete the project. 8. How quickly funds will produce housing. 9. Priority for Windsor residents, veterans, seniors, the disabled and homeless. This provision is subject to Fair Housing Laws, as may apply. Legal Requirements and Project Readiness 1. Awarded projects require project readiness such as entitlements (General Plan consistency, correct zoning, ownership or control of the project site). 2. Preference given to projects with an active Windsor entitlements application. 3. Current nonprofit registration with the California Secretary of State required for nonprofit preference. 4. Article 34 applicability (either as determined by the Town attorney or proponent s submitted attorney opinion, as required by Town of Windsor in the Request for Proposal) 5. Prevailing wages may apply. I:\60 - Community Development Dept\Housing Division\Housing Guidelines\Meetings\2016-06-15 TC\Guidelines - Attachment to Resolution.docx 2661660.1 4